Commodities | Nov 10 2010
By Greg Peel
The spot uranium price had been wallowing for some time before it started to tick painstaking higher in past months. There seemed to be buying interest but sellers were in no hurry at low prices. However, recent supply-side issues including lower grades at flagship global uranium mines and a realisation that Kazakh production forecasts had been overstated sparked up interest from the more speculative side of the market two weeks ago.
The weekly spot price suddenly jumped US$4/lb to mark its biggest gain since late 2008 before settling back US50c last week as buyers baulked at higher prices. In the meantime, the US dollar has been weakening and last week, of course, finally saw QE2 confirmed. Fed stimulus is expected to provide an indirect boost to all US dollar-denominated commodity prices.
Last week the indicative spot uranium price, as calculated by industry consultant TradeTech, jumped US$5.50 to US$57.50/lb. TradeTech reports the level of spot demand is “exceptionally high”, albeit “predominately discretionary”, meaning investors and speculators are now back in earnest. Real end-users were more inclined to sit back and reassess last week.
Hedge funds appear to be trying their luck once more. In 2006, hedge funds pushed the uranium spot price to a bubbling US$138/lb in a parabolic upswing before utilities stepped right aside and allowed the bubble to spectacularly burst. Once bitten, twice shy now? Or a new bunch?
On the supply side, producers and intermediary sellers are anticipating further upward price pressure, so offers are thin as the sellers back off to promote said price pressure. In the more realistic mid and long-term markets, in which utilities seek delivery contracts for actual consumption, interest is also building according to TradeTech.
In the previous week TradeTech had lifted its mid-term price indicator to US$56/lb from US$50/lb. The long-term indicator sits at US$62/lb.
